March 27, 2008
MIAMI (AP) -- Lennar Corp., one of the nation's largest homebuilders, said Thursday it swung to a loss in the first quarter as it absorbed charges to adjust land values, while new home sales and prices sank amid the stumbling real estate market.
Stuart Miller, chief executive of the Miami-based builder, said in a conference call that he believed the economy has slipped into recession, based on factors such as a weakening labor market, growing jobless claims, and higher food and energy prices.
But Miller expressed hope the housing market, and thus the economy, could be helped by initiatives that have been or could be proposed to fix it.
"There is a growing consensus that the deterioration of the housing market has likely led us into recession, and the stabilization and recovery of the housing market will likely lead us out," Miller said in Lennar's earnings release. "Accordingly, we expect that some of these initiatives and the many that are being discussed will lead to a bottom and recovery."
Lennar reported a loss of $88.2 million, or 56 cents per share, in the three months ended Feb. 29 compared with profit of $68.6 million, or 43 cents per share, in the year ago quarter.
The results include a 38 cent-per-share charge related to valuation adjustments and write-offs of option deposits and pre-acquisition costs. After those adjustments, Lennar's loss was 18 cents per share.
The adjusted results are better than estimates on Wall Street, where the mean estimate of analysts polled by Thomson Financial was for a loss of $1.07 per share. Some analysts include write-down estimates in their predictions, while others do not.
Sales fell 62 percent to $1.06 billion from $2.79 billion in the year-ago period. The average selling price fell 8 percent.
Deliveries of new homes were down 60 percent to 3,596 homes. New home orders were down 57 percent to 3,045, with a cancellation rate of 26 percent.
But, while the quarter's results showed no signs of stabilizing, Lennar is "staying ahead of the curve by focusing on converting inventory into cash and by solidifying the company's balance sheet," Soleil Securities Group Inc. analyst Anna E. Torma wrote in a report.
Lennar shares rose 82 cents, or 4.7 percent, to $18.41 in midday trading Thursday.
The Lennar report comes a day after the Commerce Department reported that sales of new homes fell in February for the fourth straight month, pushing activity down to a 13-year low. The median price of a new home sold last month dropped to $244,100, 2.7 percent less than the level of a year ago. The median sales price is the point where half the homes sold for more and half for less.
For Lennar, the average sales price of homes delivered dropped to $278,000, down from $303,000 in the year-ago period, partly due to higher sales incentives offered to homebuyers. The company averaged $48,000 in incentives per home delivered in the first quarter, compared to $45,500 per home delivered in the first quarter of 2007.
Lennar said it was encouraged that had no outstanding balance on its credit facility and had $1.1 billion in cash for home building, as of the quarter's end on Feb. 29. Miller said the "heavy lifting" on impairment charges were likely over, and the company was seeing improvements in homebuilding margins.
Miller said supply continues to outstrip demand for homes, which lowers the amount of new home sales and depresses prices. Lennar is holding off on buying land and adjusting operations to "to protect cash, preserve value and fortify our balance sheet," Miller said.
"Home inventories have been expanding due to the high number of foreclosures, negotiated 'short sales,' and stretched homeowners looking to sell homes they can no longer afford," Miller said.
Earlier this month, the Federal Reserve cut a key interest rate by three-fourths of a percentage point, and the Office of Federal Housing Enterprise Oversight said changes at Fannie Mae and Freddie Mac should result in an infusion of up to $200 billion into the market for mortgage-backed securities.
The changes could mean greater demand for mortgages, and aid struggling homeowners hoping to refinance at more favorable terms.
Source: Yahoo
Lennar Swings to Loss, Sales Skid
